Anyone who has been married knows there is a lot of compromise involved. Each party gives up something in order to get the benefits which can arise from sharing. Nobody get exactly what he or she wants: there is a lot of give and take.
One major area of compromise involves having children. Inevitably it’s the woman’s career that is interrupted, even if only for a short time. The norm whereby people have multiple children means women will normally expect to have more than one such career interruption. And when partners decide to have children close together it simply compresses the disruption to one long period rather than multiple shorter periods.
The end result is lower lifetime earnings, and because we are living longer a situation where women are left with significantly less superannuation than men in retirement.
The official data is somewhat dated but it shows that about two-thirds of the total superannuation pool is “owned” by men, one-third by women. Some of the imbalance will be the result of a couple acknowledging that their individual savings will eventually be pooled so it may not matter whose name is formally on the account.
But much of the imbalance arises from the fact that females receive lower pay than males even for equivalent skills. While this is deplorable, it is not a problem we should be looking to the superannuation system to solve.
The wage bias against women is clearly a much broader issue than superannuation. It impacts all of the savings and consumption decisions of single women, over all of their lives, and potentially impacts those of partnered women as well. While women do have the advantage of living longer than men, in a savings context it probably means they should work for more years in order to fund consumption in those extra years of life – as well as fighting for appropriate wages when they work.
We have however taken a few good steps towards addressing the gender imbalance.
The fact that superannuation privileges flow between partners on the death of one, is one step to address the issue. If one partner saves more than the other, it does not matter too much if finally their savings are pooled. Much of their expenditure during their lives will also have been pooled. The extension of these rights across a variety of relationships has been an important step towards social equity.
Divorce law too has recognised the issue. Divorce, or other termination of a relationship, provides the other major event which leads to concerns about the equitable sharing of joint accumulated savings. It seems clear that Australian courts and legal processes are recognising the importance of superannuation in asset allocations after the break-up of relationships.
Superannuation assets are treated similarly to any other financial asset when a partnership breaks down.
So is there a problem waiting for a regulation to address it?
Splitting the spoils
In its “Investing in Care” report, the Human Rights Commission says taxpayers should make contributions (“carer credits”) into the superannuation accounts of individuals with parental care responsibilities. To the extent that this is raising the tax of other taxpayers in order to provide a subsidy towards people who are voluntarily spending time outside the workforce, it seems very hard to make a case for it.
It seems more sensible to look to a voluntary solution. If a couple decides that a female partner should have time out of the paid workforce to have and rear a child, then we should expect the couple to share income, share expenditure and to share savings. Essentially part of the deal should be for the partners to split contributions.
There are already rules around superannuation splitting. These seem largely sensible, with the right to split (most of) both superannuation guarantee payments and any voluntary contributions. The big stand-out however is that the amount being split must be less than the individual concessional contribution caps. Essentially, by deciding to take time off work, the pair is foregoing not just income but also the tax advantages implicit in having access to two concessional contribution caps.
Maybe that is fair too.
So the institutional structures involved in sharing lifetime savings accrued through superannuation seem largely to be in place. Where a couple makes a voluntary decision for one partner to take time off work for children, they have the structures which allow them to share access to their savings. Part of the deal in having kids, should be sharing many things, including superannuation.